SIMPLE MATH TO EARLY RETIREMENT FULL

Take full advantage of your employer’s matching 401K. The other key thing to ensure you have enough money in retirement is to max out your 401K. We invest in one high-yield dividend ETF, one for the S&P 500, and one international ETF. We allocate a certain percentage of this into those three ETFs to keep things simple. We picked three low-cost Vanguard ETFs that get funded every single month. This is important in making sure that you have enough to sustain you for the rest of your life. Lastly, all the remaining money is pushed to an investment account. So, we allocate $800 a month to that savings account and only touch it for travel-related expenses.

Then, we knew we needed a separate fund just to take care of our travel bugs. We wanted to build up an emergency fund of six month’s worth of expenses, or 6 x $3,400, or $20,400. Since we figured out how much we could save, we divided them into three categories: emergency fund, travel, and investments. This method also helped us figure out our savings rate, which is the after-tax income minus the expenses divided by the after-tax income. We figured out we spend about $40,000 a year and will need $40,000 x 25, or $1 million. However, if you spend $100,000 a year, then you’ll need $2.5 million! That’s quite a difference! So, again, it’s not about how much you make, but really how much you spend.įor us, we tracked literally every single penny that was spent for a year to get as accurate as possible. For example, if you spend only $10,000 a year, then following the 25x rule, you will only need to have a $250,000 nest egg in order to retire. It’s not about how much you make, but how much you spend. This is truly the heart of financial independence. We still currently both enjoy what we do, so when we do get to 34, we’ll reevaluate our situation and see if we want to retire or continue working. We are a year and a half into this and are on track to retire in less than 10 years, at the age of 34. My husband and I started to run numbers and figured out a strategy that would get us there. If this sounds appealing to you, then great, because I was personally enticed right after I read my first FIRE article. Many people who already financially independent are working more hours than compared to before reaching financial independence - it’s just on stuff that they truly enjoy and care about. Now, t his doesn’t exactly mean they stop working. Financial independence is about people who want to quit their current jobs so they can pursue their passions without worrying about money. But what’s it all for? That’s FIRE, AKA Financial Independence / Retire Early. There’s been a new big movement among millennials sharing their net worth and what their savings rate is.

Simple math to early retirement